American Express 2014 Annual Report Download - page 39

AMERICAN EXPRESS COMPANY
2014 FINANCIAL REVIEW
CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY
Our balance sheet management objectives are to maintain:
폷A solid and flexible equity capital profile;
폷A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and
폷Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements for at least a 12-
month period, even in the event we are unable to continue to raise new funds under our traditional funding programs during a substantial
weakening in economic conditions.
CAPITAL STRATEGY
Our objective is to retain sufficient levels of capital generated through earnings and other sources to maintain a solid equity capital base and
to provide flexibility to support future business growth. We believe capital allocated to growing businesses with a return on risk-adjusted
equity in excess of our costs will generate shareholder value.
The level and composition of our consolidated capital position are determined through our internal capital adequacy assessment process,
which takes into account our business activities, as well as marketplace conditions and requirements or expectations of credit rating agencies,
regulators and shareholders, among others. Our consolidated capital position is also influenced by subsidiary capital requirements. As a bank
holding company, we are also subject to regulatory requirements administered by the U.S. federal banking agencies. The Federal Reserve has
established specific capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items.
As a Basel III Advanced Approaches institution, we reported our capital ratios using Basel III capital definitions, inclusive of transition
provisions, and Basel I risk-weighted assets. Beginning in 2015, we will report our capital ratios using the Basel III capital definitions,
inclusive of transition provisions, and the Basel III Standardized Approach for calculating risk-weighted assets. The Basel III standards will
be fully phased-in by January 1, 2019. We have also adopted Basel III in certain non-U.S. jurisdictions.
We also report capital adequacy standards on a parallel basis to regulators under Basel requirements for a Basel III Advanced Approaches
institution. The parallel period will continue until we receive regulatory approval to exit parallel reporting and subsequently begin publicly
reporting our capital ratios using both Basel III Standardized and Advanced Approaches.
The following table presents our regulatory risk-based capital ratios and leverage ratios and those of our significant bank subsidiaries, as well
as additional ratios widely utilized in the marketplace, as of December 31, 2014.
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